[Editor’s note: This post originally appeared on the LendIt Conference blog.]
Where does P2P lending fit in a family office portfolio? This is the question that was posed to me by a very prominent family office who was kind enough to share their asset allocation plans with me:
Just taking a close look at this chart, P2P could fit in many places, but where should it fit?
Should P2P fit into the fixed income bucket?
P2P lending is obviously a fixed income product, but it doesn’t share the same characteristics as a traditional family office fixed income portfolio, which is typically comprised of government treasuries and tax-free municipal bonds. P2P yields are much higher, the asset class is not liquid, the borrowers are vastly different, durations are shorter, and there is no independent ratings system like a traditional public bond. P2P is an awkward fit for the fixed income portfolio, it should probably be allocated to another bucket.